Case Digest: Star Hydro Power Ltd v National Transmission and Despatch Co Ltd

<center><span class="news-text_italic-underline">Judgment Date: 24 July 2025</span></center>

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Star Hydro Power Ltd (“<span class="news-text_medium">SHPL</span>”), a power producer, entered into a power purchase agreement (“<span class="news-text_medium">PPA</span>”) with National Transmission and Despatch Co Ltd (“<span class="news-text_medium">NTDCL</span>”), a state entity in Pakistan. Following a dispute over tariff adjustments, SHPL commenced arbitration under the London Court of International Arbitration (“<span class="news-text_medium">LCIA</span>”) rules. The arbitrator ruled that NTDCL was contractually liable to pay SHPL the difference between the tariff set by Pakistan’s regulatory authority (“<span class="news-text_medium">NEPRA</span>”) and the tariff SHPL would have been entitled to under the PPA. The arbitrator also awarded costs and interest to SHPL but dismissed other claims.

NTDCL applied to the Lahore court in Pakistan for "partial recognition and enforcement" of the award, specifically challenging Paragraph 514(i) of the award. The Pakistani court issued an interim order suspending a demand notice that SHPL had sent to NTDCL. Simultaneously, NTDCL claimed that the award was unenforceable under the NYC, arguing that it violated public policy (Article V(2)) and that the arbitrator lacked jurisdiction (Article V(1)(a)).

SHPL sought an anti-suit injunction (“<span class="news-text_medium">ASI</span>”) from the English court to prevent NTDCL from pursuing the Lahore proceedings, asserting that NTDCL was attempting to challenge the award rather than merely enforce it. The Commercial Court, however, refused to grant the ASI, reasoning that the English court had no supervisory role over the foreign proceedings under the NYC.

SHPL appealed to the Court of Appeal.

Issues:

• Whether the English court should grant an ASI to restrain NTDCL from continuing with its proceedings in Lahore, Pakistan.
• Whether Article V of the NYC permits pre-emptive challenges to awards under the guise of enforcement actions.
• The scope of the English court's supervisory role over London-seated arbitrations when enforcement is sought in foreign jurisdictions.

Decision:

The English Court of Appeal allowed SHPL’s appeal and granted the ASI, preventing NTDCL from pursuing the Lahore proceedings. The court held that:

• The English court, as the supervisory court for a London-seated arbitration, has jurisdiction over challenges to London awards, even when foreign proceedings are commenced under the NYC.
• Article V of the NYC should not be used as a mechanism for pre-emptive challenges to awards. The grounds for refusal of recognition and enforcement under Article V are a "shield" against enforcement applications, not a "sword" to attack awards before enforcement proceedings are initiated.
• NTDCL’s actions in Lahore were not mere enforcement proceedings but were a direct attempt to challenge the award itself, including the arbitrator’s findings and the obligations arising from the award. Therefore, NTDCL's actions in Lahore were a breach of the arbitration agreement.

The court further emphasised that the English courts retain exclusive jurisdiction over challenges to London-seated arbitral awards, consistent with the principles in <span class="news-text_italic-underline">C v D [2007] EWCA Civ 1282</span>, where it was held that the choice of the seat of arbitration also designates the jurisdiction for challenges to the award.

Reasoning:

The Court of Appeal's reasoning is based on the principle that the courts at the seat of arbitration have supervisory jurisdiction over arbitral awards. In this case, since the arbitration was seated in London, the English court has the exclusive jurisdiction to determine challenges to the award, even when enforcement proceedings are initiated in a foreign court.

The court also clarified that the NYC was never intended to allow parties to use enforcement proceedings as a way to pre-emptively attack awards. Article V of the NYC outlines the grounds on which enforcement can be refused, but these grounds apply only in response to enforcement applications, not as standalone challenges. Allowing pre-emptive challenges would undermine the role of the courts of the seat, as it would circumvent the arbitration agreement's requirement that disputes be resolved within the jurisdiction of the arbitral seat.

Significance:

This ruling is significant as it reinforces the supervisory role of courts at the seat of arbitration, particularly in cases where a party seeks to avoid enforcement by challenging an arbitral award in a foreign jurisdiction. The Court of Appeal clarified that Article V of the NYC serves to protect the enforcement of arbitral awards, not to facilitate pre-emptive attacks on them. This decision ensures that the integrity of arbitration as a dispute resolution mechanism remains intact by upholding the jurisdiction of courts at the seat of arbitration.

The decision also serves as a cautionary reminder to parties considering challenging arbitral awards in foreign jurisdictions under the NYC. They must do so within the parameters set by the Convention and cannot circumvent the exclusive jurisdiction of the court at the seat of arbitration.

Moreover, the case emphasises that courts will not allow parties to disguise a challenge to the substance of an award under the guise of enforcement proceedings, preserving the enforceability of international arbitral awards and preventing forum shopping.

Conclusion:

The Court of Appeal's decision in <span class="news-text_italic-underline">Star Hydro Power Ltd v National Transmission and Despatch Co Ltd</span> reinforces the principles of judicial supervision over London-seated arbitral awards and the integrity of enforcement under the New York Convention. By clarifying that Article V of the NYC is a "shield" rather than a "sword", the decision ensures that challenges to arbitral awards are confined to the appropriate jurisdiction - the courts of the seat of arbitration. This ruling provides important guidance on the enforcement of arbitral awards and the limits of pre-emptive challenges, safeguarding the efficacy of international arbitration agreements.